By David Martin, President and CEO of VeinInnovations
After a lot of fretting and fussing on 24-hour news channels of both political bents, the health insurance marketplaces opened, did business, and closed. More than seven million Americans purchased insurance while the marketplaces were open, despite a very rocky rollout and multiple protest campaigns. The Obama administration celebrated in public and likely breathed a sigh of relief in private. This week, I’ll cover the “death spiral” and what the uninsured will face until the marketplaces open again in November.
The “Death Spiral”
The term “death spiral” is used in several industries, from accounting to figure skating. In the insurance industry, a death spiral is responsible for the demise of a company. A death spiral is created when the pool of insured people isn’t a healthy blend of healthy and sick people. When people are sick, they use more services. Without enough healthy people paying into the system through premiums, costs rise for the insurance company. The following year, the company is forced to raise premium costs to cover the needs of the sick. When the costs rise, only the truly sick sign up. Costs continue to rise until the system falls apart.
The Obama administration focused a lot of attention on young people. Generally, they’re the healthiest and least likely to need care. What the healthy pay in premiums makes affordable care possible for us when we get sick – it’s what keeps the death spiral at bay. The administration partnered with FunnyorDie, a comedy website with lots of appeal among the young. President Obama even appeared in an episode of Between Two Ferns, a fictional talk show hosted by the painfully awkward Zach Galifianakis. The help of Galifianakis and LeBron James, who also joined in promoting the health insurance marketplaces, was credited by the administration as two of the most effective means of enrolling young people.
If the goal is to insure everyone, some might wonder why the marketplaces close at all. If the marketplaces were available year round, there would be no incentive to buy insurance until you needed it. You’d buy insurance when you were diagnosed with cancer or broke a leg, taking from the pool of money collected through premiums without ever having paid into the system. If you want to buy insurance on the marketplace, you have to do it during the months it’s open for business. This year, there was a surge of last minute applications. (Incidentally, those were the enrollees that pushed the number of newly insured past the seven million person goal.)
The marketplaces will open again on November 15, 2014 and close on February 15, 2015. Until then, the uninsured will be responsible for all of their own health care costs and have to pay a tax penalty.
There are exceptions to the rule, of course. If you lose your job and thus your current coverage, you can use the marketplace. If you get married or divorced, have a baby or adopt a child, you’re able to enroll during the marketplace’s “off season”. The full list of exceptions is available here.
Last week, I wrote about advance directives and how to put one together in Georgia. NPR’s Planet Money covered advance directives and released an informative podcast about the difference directives can make by visiting a town where almost everyone has planned for their death. The podcast is short and well worth the listen! You can listen to the story here.